COLORADO VOLUNTARY DISCLOSURE AGREEMENTS

What if you didn’t handle sales tax properly?

• Proper sales tax not collected
• Consumer Use Tax not remitted (Use Tax impacts nearly all businesses!)
• Not licensed everywhere required
• Not filing all required tax types
• Collecting but not remitting tax – very serious!

Act quickly before the State or local home-rule cities contact you and your options are limited! – But act with caution.

Doing business in Colorado brings more risk than in most other states. Businesses can be required to license with and collect for the State and multiple home-rule cities such as Denver, Aurora, Boulder, Colorado Springs and many other cities.

For businesses with multiple locations, service businesses, contractors and others that perform services, deliver, install or store goods in various cities and counties, the registration, collection and filing compliance burden can be overwhelming.

What’s taxable or exempt by CO State often differs from home rule cities and varies from city to city. The risk of getting it wrong is high, and the resulting tax, interest and penalties are often significant.

What can you do?

You can do nothing and hope they never catch you, but the prior liability will never go away and will continue to build as you make more sales. Corporate officers can be held personally liable. The liabilities stick even when the business is sold. Fraud and evasion can bring additional civil and criminal penalties.

You can just register and begin filing returns while hoping not to get audited, but most applications ask when you first started doing business in the jurisdiction. Plus, some cities do not consider the statute of limitations to start for the prior unfiled periods. They can and do go back to day one of business operations in their city! Some cities like Aurora limit it to 10 or so years, but that’s a long audit period.

The best option may be use us or another 3rd party to negotiate a Voluntary Disclosure Agreement (VDA) while you remain anonymous. The penalties are usually waived and the look-back period in Colorado is typically limited to 3 years. Interest is rarely waived. Payment terms are proposed.

Once the state or city agrees to the terms in writing, we disclose your information, get you registered, file required prior period returns or submit tax information, and you pay the past liability and comply going forward with a fresh start.

CAUTION: If the State or a City contacts you first, Voluntary Disclosure Agreements are no longer an option. You can be subject to less favorable audit procedures.

If you’ve collected, but not remitted tax, all tax plus interest, penalties and perhaps fraud penalties will likely be due. Penalties might still be waived. It’s the jurisdiction’s money that was collected in trust. This is a serious situation that may result in criminal charges as well. It’s crucial to voluntarily resolve the situation promptly before the jurisdiction finds you!

The information in this tax tip addresses Voluntary Disclosure Agreements in general. Results vary and circumstances may warrant more or less favorable terms. For information on what to expect in a home-rule city audit and additional issues impacting audits, see our tax tip: Denver Sales and Use Tax Audits.

It’s best to be proactive and to identify and resolve issues before an auditor contacts you. Voluntary Disclosure Agreements are no longer available once you’ve been contacted.

The good news is that remedies are often available when you’ve discovered obligations before auditors contact you. Anonymous Voluntary Disclosure is one option. Even if you are already under audit, we can often help. See our Audit Case Studies.

To learn more about how we can help with these or the following issues, please Contact us today:

• Assistance with proactive minimization of prior period sales/use tax liabilities
• Help with nexus questions and issues
• Other sales and use tax related questions

What are your priority issues and when do you want them resolved?

Please click here for more Sales Tax Tips. For additional insight on common sales tax concerns, please see the Did You Know? section of our website.

* This tip is intended to provide general information only and is not to be considered as a substitute for professional advice.